Condominiums Now Account For a Third Of New-Home Sales Here

Despite market problems and the inhibitions of government regulation, condominiums will make up a strong segment of housing here over the next decade, continuing a trend that emerged in the 1970s.

Already that trend has seen an estimated 69,117 dwellings, or 7 percent of this area's total housing stock, come under condominium ownership in the past 10 years. One out of every three new residential sales here now is of a condominium unit, one private survey of the market indicates.

In recent years the construction of private-market apartments in this area has fallen sharply. Most of the 5,000 apartments built here annually that are not condos or co-ops are rent-subsidy housing for the elderly or low-income households.

The Metropolitan Washington Council of Governments reports that there are now 33,158 apartments in this area that were built as condominiums and 35,959 that were converted to condominium ownership from rental status.

Bruce Steele, housing specialist with COG, said that as of last summer, Montgomery and Fairfax counties each had more than 15,000 condo units. The District had 10,794; Prince George's County, 9,204; Alexandria, 8,250, and Arlington, 6,291.

Condominiums are showing up in the outlying counties as well. Loudoun had 1,610 as of last summer and Prince William 1,223, Steel said. James Dowden, a condominium specialist with the Community Associations Institute, an organization of condominium developers and owners and members of homeowner associations, estimated that there were 13,000 condo conversions in this area last year. That was 10 percent of the apartment conversions in the entire country.

The growth in the local condo-co-op market has occurred during a time of rent control in the District and of moratoriums against the conversion of anything except luxury apartments. Montgomery County has also imposed rent control and the government is considering restrictions on some condo conversions.

Other jurisdictions have generaly gone without rent controls and contra-condo legislation. And in recent years, condominium construction and conversions of large, moderate-income apartment complexes have been strongest in Northern Virginia.

Among these have been the Fairlington Villages and Parkfairfax garden apartment conversions. Buyers there have been able to resell their units at a good profit.

New buildings at Watergate at Landmark, the Rotonda and Skyline have also found strong markets.

The Council of Governments also found that construction of detached houses dominated the residential market in the 1970s: Single-family houses and town houses accounted for approximately 65 percent of the new construction.

Joseph C. Murray, a property management executive with the Shannon & Luchs real estate firm, recalls that more than 40,000 rental units were built in this area in 1965. Almost all were garden apartments for the moderate-income market.

Now Murray and others say that only hundreds of apartments are being built each year, compared with thousands in the mid-1960s. Developers were eager to build apartments then, when mortgage financing was readily available and very inexpensive compared with today's record-high financing costs. Land and construction costs also were far lower. In the 1960s, a new garden apartment could be built for about $10,000. Today that cost has more than tripled.

In the 1960s, utility charges were included in the rents of most apartments. Now owners are passing along the soaring prices of oil, gas and electricity to tenants -- or are selling out to condo converters.

John L. Basrr, whose family has owned and managed the Wyoming, Schuyler and Oakland apartment buildings on Columbia Road NW for some time, said he is interested in selling out to the nearby Washington Hilton hotel because rents now have to be increased by 50 percent to make his family's investment worth holding onto and to make needed improvements. The buildings have been the subject of controversy recently because the tenants don't want to move and the District government wants to allow the Washington Hilton to expand.

In a recent report, Walker & Dunlop, a Washington real estate and mortgage banking firm, cited federal statistics showing that rents increased 56 percent nationally as part of the consumer price index in the 1970s. At the same time, the over-all CPI increase was 95 percent, the increase in fuel and utilities was 111 percent and the increase in per capita income was 117 percent.

Walker & Dunlop's quarterly Portfolio newsletter also stated: "The pattern of excessive intrusions and regulation is visible, too, here in Washington, D.C. The City Council not only has imposed rent controls but leads the U.S. in coming up with new methods to restrict investment in rental property -- from the so-called anti-speculation tax, to tenant right-of-first-refusal, to proposed new zoning restrictions on the use of transient rental property as hotels."

The National Association of Realtors recently commissioned a study of several major housing markets, including Washington. Kenneth J. Kerin, vice president of NAR for economics and research, said that survey of area 3,000 buyers indicated that about 16 percent had bought condominiums and paid a median price of $49,500. He added that the median price for condos was half that of single-family houses here.

The real estate organization's report also showed that many women and single persons buy condominiums and that purchasers with incomes under $20,000 are likely to buy condo apartments rather than houses. "They like the no-maintenance idea and the lower price structure as an affordable alternative to the more expensive single or town house," Kerin added.

The NAR study on condominium conversions here revealed that the most common reason tenants did not buy units in their buildings was that they regarded them as too expensive or over-priced. The survey also showed that 75 percent of the tenants displaced by condo conversions are middle- to upper-income persons. Displaced renters generally end up paying about 14 percent more in rent, the Realtors found.

Kerin, Murray, Steel, Dowden and others concerned with the local housing scene are aware that an estimated 15 to 20 percent of all new and converted condominium dwellings are purchased by investors who rent them out in turn. These investors are seeking the tax advantages of depreciation and negative cash flow in the hope of some long-term capital appreciation.

In most cases, investors rent out units in the first three to four years for less than the amount needed to cover mortgage payments, condo fees and taxes. In theory, that should mean that the tenant is getting a break on the rent.

But rents on individually owned condos are generally higher than those in comparable rental buildings, because the taxes and financing costs are higher.

Renay Regardie, an executive with Housing Data Reports Inc., which publishes local sales information for builders and developers, said that there are 45 condominium projects (new and converted) currently on the market and that more are expected to be offered later this year. She said that there were more than 8,400 condo sales here last year, half of them in Northern Virginia. There were 8,600 condo sales in 1978. CAPTION: Picture 1, The 1,165-unit Rotonda, is one of the many new condominium projects in Northern Virginia. Sold out since last fall, the Tysons Corner complex has three finished buildings, one being completed and a fifth that will be ready this summer; Picture 2, The Flour Mill in Georgetown, is one of the District's new condominium developments. Prices there range from $195,000 to $360,000. Photos by James Thresher -- The Washington Post